January 7, 2013

Another View: Lack of demand, not high tax rates, slows the economy

Until the middle class is thriving, there will be little in the way of investment and growth.


I read with interest the recent letter by Porter D. Leighton ("Economic education would erode anti-capitalist views," Jan. 2). While Mr. Leighton was an economics major, he displayed a fundamental misunderstanding of progressive thinking. A response to several of his points:

Mr. Leighton accuses President Obama of being a "populist demagogue," making scapegoats of the rich and raising taxes to punish success. Rather, progressives are heartfelt capitalists.

Taxation is not confiscation of "the rewards for success," but dues paid to society, enacted by elected representatives.

The tax rates are the lowest in decades, and current proposals return some of those rates to the Clinton era. Attempts to stimulate jobs and increase revenue by lowering tax rates on upper-income earners has been tried in recent decades, first by President Reagan and lately by President George W. Bush. Both drastically reduced revenue, did not stimulate job growth, created massive deficits and increased public debt, effectively refuting the theory of trickle-down economics.

Today, thanks to more than 10 years of low taxes, the wealthy have amassed personal fortunes amounting to many trillions of dollars. Yet investment is not occurring.

The reason has nothing to do with marginal tax rate and everything to do with lack of demand. The recession removed more than $1 trillion from the economy by erasing home equity and increasing unemployment.

Until the middle class is revitalized, demand will be sluggish and entrepreneurs will be reluctant to invest. Only President Obama has espoused policies directed at this middle-class revitalization, through tax and regulation policy that rewards corporations that return jobs to America.

GE, for example, recently returned some manufacturing jobs to previously idle plants. I urge readers to review the most recent edition of The Atlantic magazine for two excellent related articles.

Mark MacLeod is a resident of Ogunquit.


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